Funding a Cannabis Captive? Consider Your Technology Footprint Carefully

Cannabis Umbrellas

Funding a Cannabis Captive? Consider Your Technology Footprint Carefully

It’s difficult to predict how the captive industry marketplace will evolve in 2019 and beyond, because data from regional jurisdictions on individual cells, series and risk-bearing entities is not consistent.  However, the impetus for creating a captive remains the same: under the right circumstances, there are a host of benefits to a new formation, making it attractive to a host of companies regardless of type or size.

One type of industry in particular is making its presence known in the captive market: cannabis. In situations where insurance is too expensive, or fails to be able to cover the proper amount of risk, cannabis stakeholders are recognizing the potential value of captives—ideally, group captives. A good example of a group captive is when several cannabis companies, especially those with healthy cash flow, relatively few commercial lines’ claims, and positive risk management practices, pool their resources to form a group in order to pool their risk.

Cannabis captives face no shortage of legal considerations and regulatory hurdles, but thanks to the McCarran-Ferguson Act, the states—not the federal government—dictate the product’s legal use.  The Tenth Amendment seals this deal: it precludes the federal government from forcing states to criminalize anything, leaving the states with the right to pass, or decline to pass, their own legislation. In similar fashion, individual state insurance departments may license a cannabis captive.  And as you know, the number of states passing cannabis legalization is growing exponentially, creating a blossoming market for cannabis companies—and their insurers.

So, if you decide to fund a cannabis captive (or fund any captive, for that matter), technology will play a key role in both the creation and success of the captive or group captive both from an operational and bottom-line perspective. The good news is that you will have the opportunity to start fresh, with the latest, most effective and economical technology possible.  This requires the best possible Software-as-a-Service-based plan administration, because without it, your members’ requirements will not be met, and the captive will suffer as a result.

For example, your captive will want a comprehensive, web-based system that includes, but is not limited to, policy administration and underwriting software that is configured to meet your specific and unique underwriting guidelines and business rules, automating tasks that save time and reduce errors.

Your captive will also want the best possible CRM, because managing member/policyholder information is paramount to being able to manage customer interfacing, from routine renewals to customized communications.

Speaking of renewals, the technology that supports billing and receivables must also be reliable and error-free, with data that is easily imported into your accounting system. The system should also include analytics and BI so you can visualize your data and draw actionable insights from it.

Finally, captives must employ dependable and automated reporting software that leverages data from the entire system for use internally and during audits.

This may seem like a lot to think about, right?  But current systems, such as CHSI Connections® enterprise software, which earned shortlist consideration in 2018 and top honors from US Captive Awards in the category of Technology Initiative in 2017, and its new CHSI Connections® Captive Manager, represent an effective technology foundation that will make it easy to run your business so you can focus on some of the other business issues that will help you foster success now and well into the future.